[caption id="attachment_61725" align="alignright" width="301"] (clockwise from top left) Gary Maisel, Evan Rayner, Todd Salnas, Walt Mickens[/caption]

Now that Western Health Advantage formally announced its expansion into the North Bay, existing care providers said the arrival of a new health plan is an important step in providing choices for employers and consumers and will help those involved move toward a more integrated model of care.Health Care TrendsSept. 24, 2012Providers anticipate Western Health arrivalSutter Health pursues launch of own HMOHealth care column

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It also caps off years of planning among the region's hospitals and independent physicians, who collectively sought collaborations amid an increasingly competitive, consolidating health care landscape spurred by the federal Patient Protection and Affordable Care Act of 2010.

The expansion for Western Health Advantage, which now will include Marin, Sonoma and Napa counties, is poised to receive state approval soon. The HMO intends to begin enrolling customers this year and offer the plan in January 2013. It could be well-positioned to capture the business of a good deal of the North Bay's smaller employers, according to Gary Maisel, chief executive officer. And that, in turn, could help North Bay providers attract their share of patients with employer-sponsored health plans.

"The small-group market has kind of been our wheelhouse for a long time," Mr. Maisel said.

With the smaller employer groups and an eye on the individual market, Mr. Maisel said Western Health Advantage is seeking to secure a firm spot in the forthcoming California Health Benefits Exchange.

"Our intention is to have all of the counties where we're licensed in the exchange," Mr. Maisel said.

Initially, the exchange will define small employers as those with 50 employees or fewer, but that will eventually expand to employers with 100 or fewer employees. That's a large portion of the employers in Sonoma and Napa counties, Mr. Maisel said.

Western Health Advantage will form its network around the 600-plus-member Meritage Medical Network, based in Novato, where it will also sublease space for a small startup office. The network also includes all the region's nonprofit district hospitals (Marin General, Sonoma Valley, Palm Drive and Healdsburg District) and three St. Joseph Health--affiliated hospitals (Petaluma Valley, Santa Rosa Memorial and Queen of the Valley in Napa).

The initial filing with the Department of Managed Health Care only included Marin and Sonoma counties, but Western Health later amended it to include Napa County.

Walt Mickens, chief executive officer of Queen of the Valley, said the inclusion of Napa is of particular importance, given that some 50,000 residents receive their care in neighboring Solano County, where Kaiser Permanente and Sutter Health have large profiles. Indeed, only two commercial health plans are currently available in Napa County -- Kaiser and Blue Shield.

"I think it's great news for Napa County," Mr. Mickens said. "Our mission is to improve health. Anything that improves access helps us achieve that mission."

Todd Salnas, president of St. Joseph Health in Sonoma County, said the new network will be an important step in providing another form of managed care, and that employers will benefit from the added competition. Additionally, the development will enable all hospitals involved to keep patients out of emergency rooms.

"A lot of health systems are looking at expanding a bit beyond their acute care operations and to provide services inside and outside of the hospital setting," Mr. Salnas said. "And partnering with some type of insurance product is part of that expansion we're seeing. An example of that for St. Joseph Health and other district hospitals is this venture right here."

Providers also said Western Health Advantage's nonprofit status, its ability to compete with Kaiser in the Sacramento and Solano regions, and a heightened emphasis on physician reimbursement all make the HMO the most ideal partner.

Under health care reform, insurers must use 80 percent of premium dollars for care -- and not salaries or administrative costs -- on small groups and 85 percent on larger groups. Mr. Maisel said Western Health Advantage averages a 92 percent return on premium dollars for network physicians.

"When you look at some of the medical-loss ratios before health care reform, many of them were in the low 70 percent," Mr. Maisel said. "Twenty-five percent of the premium dollar was going to a lot of different places. We currently provide 90 cents on the dollar. And that's really why I think we were approached by these providers, because our model is very provider-centric."

The formation of the North Bay network -- consisting of an HMO, nearly 800 physicians and eight participating hospitals -- closely resembles the physician alignment associated with accountable care organizations, an initiative overseen by the Centers for Medicare and Medicaid Services under health care reform.

Yet while ACOs are being designated by CMS, the private market is moving in the same direction. This North Bay--Sacramento collaboration is a sign of exactly that.

"You're not seeing a whole lot of ACOs that would meet the definition that CMS would designate, but you are seeing a lot of market-driven solutions. It will very much look like CMS-defined ACOs," Mr. Mickens said of the newly formed network.

Currently, Western Health Advantage serves about 92,000 members and operates in Sacramento, Solano, Yolo, Placer and El Derado counties. It was founded by UC Davis Health System, Fairfield-based NorthBay Healthcare and Dignity Health.

"Another reason why this is a good marriage is because we already work with NorthBay Healthcare," Mr. Maisel said. He said the expansion could bolster Western Health's presence in Solano County, as well, given some of the commuting patterns between the North Bay counties.

The expansion is the result of years of planning by the district hospitals involved, along with Western Health's stated goal of growing itself into contagious counties.

"We've been dialoguing for some time," Mr. Maisel said. "And it got serious earlier this year."

Talks of a possible expansion for the Sacramento-based HMO first surfaced last summer, when the Northern California Healthcare Authority, a joint powers authority consisting of many of the region's hospitals, developed a regional access plan. It spoke of the need to create an insurance product in order to remain viable amidst a land of health care giants. The group of hospitals cited the 2002 demise of Santa Rosa-based Health Plan of the Redwoods as a pivotal moment, creating a void in local health plans that was quickly filled by Kaiser Permanente.

Signs of the movement became evident when the Meritage Medical Network, an independent physicians association, expanded significantly into Sonoma County in early 2011.

Evan Rayner, chief executive officer of Healdsburg District Hospital, which is overseen by the North Sonoma County Healthcare District and is part of the Northern California JPA, said the hospitals collectively view the formation of a health plan around them and other providers as a key step in extending care to patients.

"We felt that teaming up with other partners would help align a common goal amongst all of us for quality and options for access while also preparing for the future," Mr. Rayner said. "It's a three-county network, so employers will have access to choice. It's important with the changes in the ACA and with the (California) Health Benefits Exchange. More clinically integrated networks will be imperative for the consumer."

Above all, local hospitals executives said choice is a key component in helping contain health care costs and that Western Health Advantage's ability to offer competitive pricing will help providers and employers alike.

"Choice is always a good thing," said Mr. Mickens of Queen of the Valley.